A share of non-dividend paying stock is trading at USD 30. The maturity of both options is 1 year from now. A put with a strike of USD 28 is trading at USD 1 and call with a strike of USD 29 is trading at USD 8 The annual risk-free interest rate is 20%.
Is there an arbitrage opportunity? If so, demonstrate how an arbitrage profit can be calculated.
From my calculations I cannot find an arbitrage opportunity. I have tried various payoff tables,but still unsuccessful. I am preparing for my exams and am still finding these problems very confusing. Is there any tricks or hints anyone can give me.